Crude oil prices creep above $47 a barrel

Traders said prices also were nudged higher by an Energy Department report showing crude inventories declined by 1.3 million barrels last week, while gasoline inventories fell by 2.6 million barrels.

The U.S. weekly energy statistics were "pretty much what I expected," leaving supplies of both oil and gasoline nearly 4 percent above year ago levels, said Tom Bentz, a trader at BNP Paribas Futures in New York. "But the market is still in a very bullish mode."

U.S. light crude for September delivery was up 30 cents at $47.05 in early trading on the New York Mercantile Exchange. The contract hit a record closing high of $46.75 on Tuesday. On an inflation-adjusted basis, oil is still about $10 a barrel, or 18 percent, cheaper than it was just before the first Gulf War.

On London's International Petroleum Exchange, Brent crude futures for October delivery traded at $43.21 per barrel at midday, up 22 cents from Tuesday's floor trade close.

Traders remained concerned over unrest in Iraq. Fighting continued in the holy city of Najaf despite a peace proposal delivered by the Iraqi interim government to aides of militant cleric Muqtada al-Sadr in Najaf.

Forces loyal to al-Sadr had earlier threatened to blow up crucial oil pipelines, prompting a temporary stop to the flow of crude.

Before the latest round of violence in Najaf, Iraq had been exporting roughly 1.7 million barrels of oil per day, although volumes have fallen recently to about 900,000 barrels per day, according to a source within the Organization of Petroleum Exporting Countries who spoke on condition of anonymity.

Meanwhile, traders were also anxious about the oil supply in Russia, where oil giant Yukos' fortunes took a turn for the worse Tuesday after a court rejected the company's attempt to suspend government efforts to collect $3.4 billion in back taxes.

Yukos pumps about 1.7 million barrels a day and its legal troubles have raised concerns that productivity could suffer and the company could be forced into bankruptcy.

In order for prices to decline significantly, Bentz add, "we need to see Iraqi supplies coming back and the Yukos problems to go away."

Analysts also cited concerns over the situation in Venezuela, the world's fifth-largest exporter. Although Venezuelan President Hugo Chavez survived a recall vote Sunday, the market was still wary of possible unrest in the South American country.

"As for Venezuela, people are still concerned over where that's heading," said energy analyst Daniel Hynes at ANZ Bank in Melbourne, Australia.

"It's (the market) driven by fear and the perception over severe supply disruption. Anything is possible," said Hynes, when asked whether prices could hit $50 per barrel.

With little spare output capacity around the globe, analysts worry that oil producers would have a difficult time making up for shortfalls at a time of robust demand.

Saudi Arabia said last week it could immediately pump an additional 1.3 million barrels per day, but the comments didn't soothe markets. Experts said the well-intentioned pledge only highlighted the country's limitations.

Associated Press Michael McDonough in London contributed to this report